Technical Assistance to strengthen the capacity of

Transcript:Technical Assistance to strengthen the capacity of:
Technical Assistance to strengthen the capacity of the Tonga Electricity Commission in promoting private sector investments in Tonga’s Power Sector Pacific Community (SPC) Tonga Electricity Commission (TEC) Training Program by Dr. Viren Ajodhia IPPs and PPAs Thursday 13 August 2020 Program Role of the IPP IPP/PPA process PPA Basics PPA and RE technologies PPA Tariff Why an Independent Power Producer? Growth in electricity demand and aging capacity Requirement of new investments in power generation Public finance for power investments is not generally available Challenges and risks of technologies that are relatively new Governments seek for competition in power production New generation investments by Independent Power Producers (IPPs) with Power Purchase Agreement (PPAs) Utility should remain responsible for generation expansion planning and keeping up reserve capacity Power Purchase Agreement (PPA) A PPA is a legal contract between an electricity generator (seller) and a power purchaser (buyer). During the period of the contract the power purchaser buys electrical energy, and sometimes capacity, from the electricity generator. The Seller (IPP) is (often) the developer, owner and operator of the technology that generates electricity. The Buyer is (often) a utility company that purchases the electricity generated from the seller. Dependent on the type of (renewable) technology utilized for power generation, PPAs need to be tailored to relevant requirements and specific issues. Long term relationship In the PPA a long-term relationship between the utility and the IPP will be created (15 or 20 years – up to 25) For the IPP a long-term stream of revenues is necessary for securing the financing and the rate of return For the utility the delivery of a defined amount of electrical energy has been secured In the case of renewable energy a step has been made towards achieving goals on the targets as set for renewable energy and reduction of the usage of fossil fuels Advantages Encourage and attract private investment Injection of new foreign capital (FDI) in the country Transfer of technology and know-how Completion of project within time frame and budget Project structure Models BOT: Build Operate and Transfer BOOT: Build Own Operate and Transfer BOO: Build Own Operate Build Operate and Transfer Government grants a concession (right to build, own and operate the facility) to a sponsor Government grants a long term lease or sell the site to the sponsor (provision of land) Often acquire most or all of the service provided by the facility